India Economic Reforms: Deals Report Card

Seven months after Indian Finance Minister P. Chidambaram announced “big bang” reforms meant to get greater foreign investment into India, the country is only just close to getting its first such deal.

Jet Airways said Wednesday that its board had approved the sale of a 24% stake to Abu Dhabi’s Etihad Airways for at least $380 million. The deal still needs approval from Indian regulators and Jet’s shareholders, but it is widely expected to go through.

This is “a definite plus for the government as this is the first deal to have happened after the latest reforms were announced,” says Mahantesh Sabarad, a Mumbai-based analyst with Fortune Equity Brokers Pvt.

In September, New Delhi allowed foreign airlines to buy up to a 49% stake in Indian carriers, and also allowed investments by big-box foreign retailers like Wal-Mart Stores Inc. WMT -1.34% for the first time in India, among other reforms.

But analysts say foreign companies continue to find it difficult to make investments mainly because of red tape, politicking and various conditions imposed by the government.

“Some of the euphoria certainly has worn off,” said Anirudh Datta, Mumbai-based head of research at CLSA, a brokerage and investment firm in Mumbai.

Here’s a look at the major sectors that were opened up to greater foreign investment, and the deal activity so far:

Aviation: This sector has seen the most active in deal-making, maybe because it’s also the most needy.

In recent years Indian airlines have been making heavy losses thanks to rising fuel costs and high taxes. Jet’s deal with Eithad will help the Indian carrier pare its debt of more than $100 billion as of March 31, 2012, the most recent data available.

Of course, the airline most desperate for foreign money, Kingfisher Airlines, hasn’t lately been talking about foreign investment. That may be because the airline needs to first start flying again.

Retail: Until September, foreign retailers like U.S. retail giant Wal-Mart Stores Inc. and Carrefour S.A., who sell products from various brands, weren’t permitted to set up retail stories in India. Allowing them in was considered a game-changer by experts. Consulting firm Technopak Advisors expects India’s retail sector to be worth $80 billion by 2021.

But while some multi-brand retailers have expressed interest in entering India, the government has not yet received a single application for setting up in the country.

Companies are trying to understand the plethora of rules involved, and also figure out which state governments will allow them to set up stores. Wal-Mart, which has been eyeing India for quite some time now, hasn’t yet submitted a proposal for its retail foray. Even single-brand retailers, most notably Swedish furniture-maker Ikea, are still awaiting regulatory approvals.

In late 2011, India had allowed single-brand retail firms to set up 100%-owned ventures. But the government had imposed a condition that these companies should buy at least 30% of their goods from local small and medium-sized Indian companies. Foreign retailers balked at that, so in September, India relaxed this condition.

Ikea jumped at the chance, but while it has got one key approval earlier this year, it is awaiting approval from the Cabinet Committee on Economic Affairs to finally set up shop.

Several smaller single-brand retailers, such as U.S.-based jewelry and watch maker Fossil Inc. have got all permissions to set up wholly owned operations earlier this year.

Broadcast: The foreign investments cap for satellite and cable TV operators was increased from 49% to 74%. But so far no major deals have happened in the last seven months.

Insurance and Pension: Under Mr. Chidambaram’s direction, the cabinet in September had also increased the foreign direct investments in the insurance sector to 49% from 26%, and had allowed foreign companies to invest up to 49% in companies that manage pension assets in India.

Two bills allowing these investments needs to be approved by parliament, but with just a week to go before the current parliament session ends, this won’t likely happen anytime soon.